August 9, 2011 / 6:24 PM / 7 years ago

Wyoming bills would crack down on shell companies

ATLANTA (Reuters) - Wyoming state legislators will consider three new bills next week aimed at reining in “shell” companies formed under the state’s liberal incorporation laws, according to Wyoming Secretary of State Max Maxfield.

The move follows a Reuters investigation in June that showed how Wyoming, Nevada and Delaware have become popular business-secrecy destinations at a time when Washington is demanding other countries improve financial and corporate transparency.

Reuters found that one 1,700-square-foot house in Cheyenne is home to more than 2,000 firms, including hundreds of shell companies — paper-only firms with few assets. Some of those firms have been used to shield real estate for a jailed former prime minister of Ukraine, sell fake parts to the Pentagon and process payments for illegal online gambling.

Maxfield told the Wyoming Tribune-Eagle newspaper on August 8 that the bills would strengthen his office’s ability to issue cease-and-desist orders against firms that file false documents with the state, close a fee-related loophole and ban “nominee” officers and directors.

Wyoming is one of only a handful of states which do not already prohibit nominees — individuals who stand in for the real owners of companies to hide their identities.

The Reuters investigation found Gerald L. Pitts, the owner of the house in Cheyenne which is the headquarters of mass incorporator Wyoming Corporate Services, is the director, president or principal of 41 firms, according to Wyoming state incorporation data maintained by Maxfield’s office.

Secretary Maxfield said twice in outlining the legislation to the Wyoming Tribune-Eagle that the Reuters report was not what forced his hand.

“Since 2007, when I took office, this has been a top priority for us,” Maxfield was quoted as saying. “We’ve been working toward this for several years, which is well before that report came out.”

In a June 30 interview with the Wyoming Tribune-Eagle immediately after the Reuters investigation was published Maxfield said that the state’s laws were doing a good job of preventing fraudulent companies from setting up in the state.

On August 2, Senator Carl Levin, the Democratic chairman of the Senate Homeland Security Committee’s Permanent Subcommittee for Investigations, reintroduced a bill called the Incorporation Transparency and Law Enforcement Assistance Act. The bill would require states to collect data on the real, or “beneficial,” owners of corporations, with some exceptions.

Senator Levin, who cited Reuters’ investigation in a statement read on the Senate floor, has introduced the bill every year since 2008 in response to law enforcement agencies’ concerns about the easy availability of shell companies with anonymous owners in states such as Wyoming.

“Today, it takes more information to obtain a driver’s license or open a U.S. bank account than it does to form a U.S. corporation,” said Levin. “Our states don’t require anyone to name the owners of the corporations being formed under their laws, practically inviting people to misuse” them.

The bill has so far never made it out of the Homeland Security Committee, beaten back by a coalition of state regulators and business groups, including the National Association of Secretaries of State, who argue it would be a costly and burdensome federal mandate.

Reporting by Brian Grow; editing by Claudia Parsons

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